AML Solutions for Check Cashers – the Road to Ensure Compliance
Anti Money Laundering (AML) counter efforts are the cornerstones of establishing an effective compliance program. Check cashers rely on experts that help them prevent financial fraud. However, criminals are coming up with more advanced strategies to forge documents and flow their illicit funds through institutions. Check fraud resulted in a loss of $400,000 with money laundering cases also experiencing an unexpected spike.
Check cashers are facing a surge in financial crimes which are exposing them to serious legal penalties. In wake of this, these service providers need to integrate AML solutions for establishing efficient fraud prevention and compliance plans. As the regulatory landscape continues to evolve, detecting money laundering has become more crucial. This blog how AML security solutions help check cashers ensure compliance with legal requirements.
Fraud Risk and Cash Cashers Need to Establish AML Systems
Check cashers running licensed money services are subject to legal requirements in laws such as the Bank Secrecy Act (BSA). The regulatory landscape is continuously changing. Therefore, global watchdogs including FATF, EU, FINTRAC, and FinCEN are making amendments to their existing anti-money laundering regimes. Considering this, the check cashing companies need to upgrade their compliance programs as well.
AML solutions assist check-cashing companies by taking variables such as services offered, region-based regulations, location, and other factors into view. Financial institutions are less likely to partner with check cashing companies that have a compromised reputation, fall under sanctions, or have inadequate AML systems.
Financial institutions can not risk their customers’ privacy for which they see if the pitching check casher company ensures AML compliance. Onboarding fraudulent service providers or those facilitating money laundering can lead to hefty penalties. Check cashers experience various fraud schemes, making integrating AML solutions a liability.
Illegal Check Fraud Scheme Carried Out by Pederson’s
A 20-year-old girl, Mackenzie Pederson was detained on September 8th, 2022 due to her involvement in theft by swindling. She was a part of two check fraud schemes that led to an actual loss of $4,675. Inadequate anti-money laundering measures facilitated Pederson to make a withdrawal of $400 by using a check belonging to some “GA” with a value of $7,425.93.
The second incident took place on April 1, 2020, when another check was deposited by Fairview Clinic in “NW’s” bank account. Later Pederson obtained the credit card and PIN of this holder to make a transaction. The complaint further added that NW went to the bank with Pederson and two other members including their ringleader to make a withdrawal of $4,275. However, it was found out that the check was fake and victims fell into the trap of these Pederson along with fellow fraudsters.
AML Security Regulations and Trends – the Threat of Derisking
Derisking is the phenomenon where financial institutions close down accounts of check cashers due to their inefficiency in ensuring AML compliance. As per the list formally retracted by FinCEN in 2015, coin traders, firearm dealers, credit repair services, and lottery sales are deemed risky as they pose threats of financial crimes. Check cashers facilitating these money businesses need to perform due diligence for preventing unforeseen consequences. Therefore, establishing AML systems has become crucial for them.
Crack Down on Internal AML Controls
Legal watchdogs are abolishing the so-called check cashers’ in-house anti-money laundering controls. These also include tracking, recording, and reporting suspicious financial activities to authorities on time. Due to insufficient AML monitoring controls, check cashers have been failing to counter criminal activities. Furthermore, it results in insufficient paperwork required for creating Suspicious Activity Reports (SARs).
In order to toughen anti-money laundering requirements, FinCEN added a fifth pillar within standards set by BSA. It requires check cashers should validate customers prior to transferring the amount. Furthermore, in case of opening a new account, they need to authenticate the purpose behind it. As check cashers are using POS technology to collect, analyze, and verify client data, they should further adhere to their processes with Know Your Customer (KYC) and AML compliance.
Change of Requirements Within BSA
As per the amendments made by FinCEN, check cashiers will have to implement the following requirements:
- Aligning internal policies with AML verification laws
- Enhancing controls, operations, and working mechanisms to detect criminal activities
- Establishing efficient AML compliance programs for deterring and preventing money laundering
- Hiring a qualified BSA expert
- Continuous training of employees conducting AML screening and other workers
- Carrying out independent audits to check cashers’ activities
Key Takeaways
Check cashers are becoming vulnerable to financial crimes due to inefficient AML compliance programs. As they are transforming their operations, conducting KYC verification before digital onboarding has become equally crucial. Moreover, regulatory bodies are placing stringent money laundering prevention requirements in place. These mandates check cashers to bring in more effective AML solutions for eliminating legal consequences and ensuring secure operations.